AFC Uzbekistan Fund October 2024 Update

Dear Investors and Friends,

In October, we received further positive news regarding the partial sell-down of the Uzbek Commodity Exchange (TSE: URTS) by the Uzbek government, for which local investor demand remains very strong. However, the broader market continues to face challenges as we await the finalisation of the capital markets infrastructure. This improvement will make it easier for large foreign financial institutions, which are already showing interest, to begin allocating capital to the market and which in our view should be very positive for the market and future price performance. As of October 2024, the fund's Net Asset Value (NAV) decreased to an estimated USD 1,327.7 (-1.9%), corresponding to a return of +32.8% since its inception on 29^th March 2019.

AFC Uzbekistan Fund valuations as of 31^st October  2024:

Macro update

While we await the completion of the upgrades to Uzbekistan's capital markets, which are progressing, it’s important to note that the macroeconomic outlook for Uzbekistan remains robust.

For the first nine months of 2024, GDP grew by 6.6%. Earlier this month, the IMF updated its GDP growth projections to 5.6% for 2024 and 5.7% for 2025. Thereafter, the Uzbek government announced expectations for GDP to reach USD 200 billion by 2030, an increase from USD 101 billion in 2023. Notably, 2023 GDP was revised upwards by 12%, or USD 10.7 billion, by the IMF as they incorporated figures from the grey market economy, which was estimated to constitute 60% to 70% of GDP when Asia Frontier Capital began investing in the country. The government has made significant strides in eliminating the grey market through enhanced enforcement, digital measures, and simplifications to the tax code. For example, following the tax code reforms, the number of individuals registered as "self-employed" surged by 87% year-on-year, reaching 4.08 million.

Despite facing persistent inflation—aimed to be reduced to 7% by the end of 2025—and budget constraints, the government has effectively maintained high and diversified economic growth driven by robust domestic demand.

Uzbek Commodity Exchange Secondary Offering Update

In the final week of September, the government announced a secondary offering to sell 4.44% of its stake in the Uzbek Commodity Exchange (TSE: URTS). This sale will reduce the government’s ownership to 40% post-offering and will enhance the liquidity of the company’s shares, which currently have a free float of 15%. The 4.44% stake equates to 3,326,031 shares or approximately USD 3.7 million as of 31^st October 2024. The offering is structured as a Dutch auction, with a price range set from UZS 12,900 to UZS 18,000 per share, resulting in a dividend yield of 20.16% at the low end and 14.44% at the high end of the range.

This paragraph recaps the September 2024 update and is highlighted because the book building was originally scheduled to close on 25^th October 2024. However, in mid-October, the government announced that the closing of the book would be pushed back to 8^th November 2024. Typically, this would suggest an unsuccessful offering since more time is allowed to attract investors. However, in this instance, the situation is quite the opposite. The book is likely to be significantly oversubscribed, but due to a surge in new brokerage accounts being opened, mainly by local Uzbek retail investors, stock brokerages have been overwhelmed by demand. The extension was a necessary step to accommodate the influx of inquiries and account processing.

This news is very encouraging, indicating that a well-managed state-owned enterprise is successfully privatising further shares amid strong demand. This marks a significant contrast to the partial privatisations of a glass manufacturer and a metal fabrication company in 2018 and 2019, both of which struggled with profitability and saw their share prices decline following their secondary offerings.

For further viewing, here are some interesting, relevant news links related to Uzbekistan:

IMF updates Uzbekistan's GDP growth forecast to 5.6% for 2024 and 5.7% for 2025

Average salary in Uzbekistan reaches UZS 5.15 million (~USD 400), +16.4% YoY

Uzbekistan's mortgage backed securities set to transform financal landscape

AFC Uzbekistan Fund Marketing Information as of the end of September 2024

Subscriptions

The next cutoff date for Subscriptions will be 25^th November  2024. If you would like any assistance with the subscription process, please get in touch with us at This email address is being protected from spambots. You need JavaScript enabled to view it.

Best regards,

AFC Uzbekistan Fund

Disclaimer:

This Newsletter is not intended as an offer or solicitation with respect to the purchase or sale of any security. No such offer or solicitation will be made prior to the delivery of the Offering Documents. Before making an investment decision, potential investors should review the Offering Documents and inform themselves as to the legal requirements and tax consequences within the countries of their citizenship, residence, domicile and place of business with respect to the acquisition, holding or disposal of shares, and any foreign exchange restrictions that may be relevant thereto. This newsletter is not intended for distribution to or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law and regulation, and is intended solely for the use of the person to whom it is intended. The information and opinions contained in this Newsletter have been compiled from or arrived at in good faith from sources deemed reliable. Opinions expressed are current as of the date appearing in this Newsletter only. Neither Asia Frontier Capital Ltd (AFCL), nor any of its subsidiaries or affiliates will make any representation or warranty to the accuracy or completeness of the information contained herein. Certain information contained herein constitutes “forward-looking statements”, which can be identified by the use of forward-looking terminology such as “may”, “will”, “should”, “expect”, “anticipate”, “project”, “estimate”, “intend”, or “believe” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results or the actual performance of Funds managed by AFCL or its subsidiaries and affiliates may differ materially from those reflected or contemplated in such forward-looking statements. Past performance is not necessarily indicative of future results.

For Switzerland only: This is an advertising document. The state of origin of the fund is the Cayman Islands. This document may only be provided to qualified investors within the meaning of art. 10 para. 3 and 3ter CISA. In Switzerland, the representative is Acolin Fund Services AG, Leutschenbachstrasse 50, 8050 Zurich, Switzerland, while the paying agent is NPB Neue Privat Bank AG, Limmatquai 1 / am Bellevue, 8024 Zurich, Switzerland. The basic documents of the fund report may be obtained free of charge from the representative. Past performance is no indication of current or future performance. The performance data do not take into account the commissions, if any, and fund transfer costs incurred on the issue and redemption of units.

AFC Asia Frontier Fund is registered for sale to qualified/professional investors in Japan, Singapore, Switzerland, the United Kingdom, and the United States. 

By accessing information contained herein, users are deemed to be representing and warranting that they are either a Hong Kong Professional Investor or are observing the applicable laws and regulations of their relevant jurisdictions.

© Asia Frontier Capital Ltd. All rights reserved.